Tuesday, November 24, 2009

Ask the Carless Guy Vol. II

Not really a question, but I received an email from a former colleague with this article attached, and this particular quote called out:

George Ablah, a prominent real estate developer who was a leader on the steering committee in 1989, foresaw a parking problem — and still sees it.

He said the old rules of development were "location, location, location, location." Now it's "location, parking, no social problems, location."

He said he suggested that the city buy vacant and blighted buildings, tear them down and use the land for parking.

Development would follow, he said.

But that didn't happen.

"We would have had a booming area," he said. "I could be wrong. But we didn't do it, so we can't prove it."

Or, you might be a dinosaur of the 20th century economy. While certainly a smart and savvy developer, this guy doesn't know the first thing about cities. And I'm talking about understanding the underlying dynamics at work shaping cities. The following is really my general advice to understanding articles like this:

Whenever you read quotes from somebody or an op-ed, or any article for that matter, you have to understand the person's point of view. W hat's their angle? Ablah, is a developer, so he's looking for the city to make his life easier by assembling land, writing down his costs, and providing parking, that is all costs the developer doesn't have to bear in his pro formas.

It's certainly one strategy, and not a terrible one (b/c i can't comment on the state of the buildings he is referring to), but it is one of a different era as I will describe. I will tell you that anybody that says any city "needs more parking," they really don't know how city evolution works.

It worked for Portland, catalyzing development by building sub-grade publicly funded parking garages, b/c they were systematically removing the blight on neighborhoods and development that parking is. Furthermore, they are, again, removing a hard cost the developer would normally bear as parking is externalized from the development.

In this circumstance, however, I get the feeling that this particular developer is (to some degree) thinking about retail (since he's harboring sentiment from the 1989 masterplan) and making the parking accessible for suburbanites to come in once in a while to this imaginary downtown shopping wonderland is a mistake. When what is really needed is a vast influx of residential (of broad market segments), repositioned into walkable, livable downtowns, cutting the transportation barriers out of the local economy, and allowing the retail/commercial/jobs to "emerge" or follow the new market created via the demand of new residents.

But most importantly, b/c most cities right now are too broke to be assembling land and tearing down buildings. There are however, creative policy measures that incentivize (or "incent" if you prefer actual English) the selling of underperforming land at prices much lower than the owner imagined they would be getting in the condo boom of the past ten years (or if they were holding on cash generating business that drags down the City and, in turn, the City's economy, i.e. privately owned/managed surface parking lots).

These strategies (without getting into particulars) include varying degrees of carrots and sticks if you will, that amortize the carrots in favor of bigger sticks the longer you go. This is somewhat counter-intuitive to the common wisdom of incentivizing initial catalyst developments via a variety of subsidies and then voila! the market will be established and naturally fill in the rest.

When what we've actually found is that the market gets set by the subsidy and the city gets held at the barrel of a gun for similar subsides on every single project. (See: Dallas and the Merc, then the Convention Center Hotel)
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Second piece of news: nobody asked me this, but I'll opine anyway. Dallas feels left out of new $1.85B highway bill. Frankly, Dallas should feel so lucky. The LAST thing any Texas city needs is more highway construction. Unfortunately, people are too stupid or corrupt and think spending taxpayer money for short term jobs and long-term disasters is good economic policy.